For the “uninitiated,” the theory says that a win by a team from the old National Football League is a precursor to rising stock values for the year (at least as measured by the S&P 500), but if a team from the old American Football League prevails, stocks will fall.
However, as luck would have it, no matter who wins Super Bowl XLI between the Chicago Bears and the Indianapolis Colts on Sunday, the Super Bowl Theory calls for a 2007 market rally – since both teams belong to the old NFL.
The National Football Conference Chicago Bears have a long, rich tradition in the NFL – in fact, they are one of only two charter members still in existence (albeit as the Decatur Staleys). The Indianapolis Colts, which are representing the American Football Conference, are nonetheless originally an NFL team, having joined in the mid-1950s as the Baltimore Colts (before their departure to Indianapolis in 1984). The same situation was present in last year’s Super Bowl, where the Pittsburgh Steelers defeated the Seattle Seahawks – both NFL clubs – and, of course, 2006 was a good year for equities, with the S&P 500 closing up more than 13%.
But could such an odd indicator really work? Believe it or not, since the first Super Bowl was played in 1967, the so-called Super Bowl indicator has correctly forecast the S&P 500’s direction 3 out of 4 times(1).
Unfortunately for those looking for a clear winning strategy, the Super Bowl indicator has had only one clean win in the past nine big games (it’s hard to count 2006 as a “clean” win, though it was clearly a win for everyone but the Seahawks).
Consider the AFC New England Patriots’ 24-21 win over the NFC Philadelphia Eagles in 2005. According to the Super Bowl Theory, the markets should have been down for the year. However, in 2005 the S&P 500 climbed 2.55%.
Of course, the 2002 win by the AFL-born New England Patriots accurately foretold the continuation of the bear market into a third year (at the time, the first accurate result in five years). But those same Patriots prevailed against the Carolina Panthers in 2004 – and a fall rally helped push the S&P 500 to a near 9% gain that year, sacking the indicator for another loss.
Consider also that, despite victories by the old AFL Denver Broncos in 1998 and 1999, the S&P 500 continued its winning ways, while victories by the NFL legacy St. Louis (by way of Los Angeles) Rams and the Baltimore (by way of NFL legacy Cleveland Browns) Ravens did nothing to dispel the bear markets of 2000 and 2001.
In sum, the Super Bowl Theory has a good predicative track record – just not a good predicative track record lately. As for Sunday – well, if 2006 may be relied on, then 2007 should be a good year, regardless of the winner.
(1) Note: Other exceptions included: 1970, when AFC Kansas City won, and the S&P index gained 0.1%; 1984, when AFC Los Angeles Raiders won, and the S&P rose 1.4%; 1990, when NFC San Francisco prevailed, and the S&P lost 6.56%; and 1994, when NFC Dallas triumphed, but the S&P index fell 1.53%.